Freeze - Family Limited Partnerships

A Powerful Planning Opportunity

So where is the next generation of Family Limited Partnership (FLP) planning headed? While not new, the concept of using a derivation of the traditional FLP appears to be making a comeback. The concept of a “freeze partnership” is again receiving attention as an alternative to the traditional FLP structure.

A freeze partnership is a partnership in which there are two classes of interests: a preferred interest and a common interest.

When properly structured, the freeze partnership can help client obtain up to a 90% discount on an FLP interest. Traditional FLP discounts max out at 20-40% depending on the assets held.

Example:

If Dr. Smith used the freeze partnership to move say $3,000,000 to his heirs, he would not have to spend $75,000 a year on life insurance to cover the estate taxes. He might not have a need because he used other good planning steps.

If Dr. Smith received a 90% discount on his $3,000,000 interest in the FLP, he could gift that interest to his heirs using only $270,000 of his $1,000,000 lifetime gift tax exemption.

If you have an estate tax problem and would like to transfer a significant amount of assets out of your estate at a 90% discount, then you should learn more about the powerful freeze partnership.

To learn more about the freeze partnership, please e-mail clientservices@trustmakers.com